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Marit Brunsell deposited $50,000 at Bank of America at 8% interest compound quarterly. What is the effective rate (APY) to the nearest hundredth percent?
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Marit Brunsell deposited $50,000 at Bank of America at 8% interest compound quarterly. What is the effective rate (APY) to the nearest hundredth percent?

User BrandonLWhite
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1 Answer

3 votes

Answer:

EAR = 8.24%

Step-by-step explanation:

EAR = (1+APR/n)^n-1

Where n is number of compounding per year = 4

EAR = (1+8%/4)^4 - 1

EAR = (1 + 0.02)^4

EAR = (1.02)^4

EAR = 1.08243216 - 1

EAR = 0.08243216

EAR = 8.24%

User Fatih Tekin
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